Knowing the specifics about Arizona's tax situation will make retirement easier

Arizona is the capital of retirement in the western United States for good reason. With over 200 sunny days a year, diverse regions, many outdoor recreation options, and a comparatively low cost of living, it’s no wonder active adults have been heading west for decades.

If you’re considering a warm retirement in Arizona, there are a few things you should know before making the move. One of them is the state’s taxes. The state’s taxes are generally friendly. The Tax Foundation gives Arizona a tax burden of 8.8 percent, raking it at 36 among the 50 states.

The Basics

  • Sales Tax: 5.6 percent with local taxes ranging from 1.5 to 4 percent
  • Gas Tax: 19 cents
  • Income Tax: Five tax brackets ranging from 2.59 to 4.54 percent. Brackets available here
  • Retirement Income and Social Security: Exempt unless coming from an out-of-state government pension
  • Inheritance Tax: None

Property Taxes

Property taxes in Arizona are set at the county level by an assessor. The average property tax rate statewide ranges between .87 and 1.5 percent of a home’s market value.

Popular Exemptions

  • 65 & Up: Single homeowners 65 and up making less than $36K and married couples making less than $45K can earn tax credits.
  • Retired Military: $2,500 exempt
  • Senior Property Valuation Protection: Freezes property taxes for seniors that meet certain requirements. Seniors must reapply every three years.